HONG KONG, Aug 10 — Asian equities this morning largely halted a dramatic sell-off sparked by spiralling bellicosity over North Korea, as tentative calm returned to markets following reassuring words from the US Secretary of State.

Tokyo was flat by the break as the yen stabilised against the US dollar after the greenback edged higher from eight-week lows yesterday.

Shanghai eked out gains in morning trade although Seoul shares continued their decline after slumping more than one per cent yesterday, and Hong Kong was also down.

Equity markets around the world had fallen as the war of words between the US and North Korea escalated, with the Dow recording its second negative close, although its 0.2 per cent loss was smaller than in other bourses.

Paris stocks endured a torrid session to end 1.4 per cent down after a suspected terror attack in France.

However, stability returned to markets this morning after Secretary of State Rex Tillerson sought to play down tensions triggered when President Donald Trump stunned the world with an apocalyptic warning to unleash “fire and fury” on North Korea.

Tillerson said: “I think Americans should sleep well at night, have no concerns about this particular rhetoric of the last few days.”

Analysts credited the intervention with easing traders’ nerves.

“Calming words from the US Secretary of State helped ease market concerns over potential armed conflict with North Korea,” said Michael McCarthy, chief market strategist at CMC Markets.

Oanda’s Stephen Innes said Tillerson had “extinguished the raging political fires”.

‘Tensions are high’

Investors’ focus was beginning to return to the US economy after Chicago Federal Reserve president Charles Evans said yesterday it would be “reasonable” to announce the beginning of a reduction of the Fed’s balance sheet next month, while cautioning disappointing inflation data may delay interest rate increases.

Markets watchers were awaiting a speech by New York Fed president William Dudley ahead of Friday’s inflation data

However, the aftershocks of yesterday’s verbal quake continued to rumble, with Trump boasting on Twitter that America’s nuclear arsenal was “far stronger and more powerful than ever before”, as US Defence Secretary Jim Mattis warned North Korea to stop considering any action that risked “the destruction of its people”.

Pyongyang this morning mocked the US president as “bereft of reason” who would only respond to force, raising the stakes with a plan to send a salvo of missiles towards the US territory of Guam.

However, Tillerson said he did not believe “there is any imminent threat” to Guam or other US targets.

“Tensions are high. Markets have taken a little notice,” said Greg McKenna, an analyst at AxiTrader.

Typical safe haven asset gold remained high this morning—broadly holding gains at around US$1,276 (RM5,472.76) an ounce after surging 1.3 per cent yesterday—as investors reacted to the sabre-rattling.

On commodities markets, crude advanced after a US Department of Energy report showed a bigger drawdown than expected in oil stockpiles.

“A consistent drawdown in inventories is the best indicator of the tightness coming in the oil markets which can feed prices higher in time,” McKenna noted.

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